Securities Negligence

Negligence in the context of securities is a common law cause of action based on the duty of care owed by a broker to the customer and the breach of that duty. Under this view, the broker is expected to exercise due care in connection with an investment account. Negligence does not always involve intentional misconduct such as falsifying statements; carelessness or mistakes can also rise to the level of negligence under some circumstances.

When is Best Time to Act?:

When facing allegations negligence involving a brokerage agreement, sound advice generally dictates that one seeks counsel as soon as there is any indication of dispute with an investor, Under New York law, the statute of limitations for breach of fiduciary duty claim is 2 years, thus providing an extensive period to file a claim. Based on this lengthy limitations period it is important seek counsel as soon as possible regarding any situations that may present a litigation risk.

Types of Crimes & Charges:

Common forms of negligence claims arise in cases where a broker carelessly or negligently claims regarding investments, failing to exercise due care about an investment account such as by failing to properly diversify a portfolio. In some cases, negligence can be found in cases whereby a firm fails to properly supervisory and compliance procedures that lead to losses for the investor.

Regulations/Legislation:

A cause of action for negligence or malpractice by a broker or brokerage firm rests on a common law cause of action arising from State law. The elements of a cause of action for negligence are based on (1) the presence of a duty owed by the broker to the customer (2) a breach of duty, and (3) damages proximately caused by the breach of duty

Penalties & Punishment:

A party a Court deems to have been harmed by a breach of a brokerage contract will be eligible for compensatory damages, or damages to compensate for any loss that occurred because of the breach. In some rare and extreme cases, the aggrieved party may be awarded punitive damages to punish the breaching party and deter similar conduct in the future.

Successful Defense:

Defenses to claims of negligence often hinge on the presenting evidence of the appropriate duty of care owed to a client and whether or not this duty wad breached these are primarily matters of presenting evidence favorable to the Defendant. In some cases, a Defendant may be able to allege that the client contributed to the alleged harm that occurred.

Differences between State & Federal Charges:

State law generally dictates the duty of care under a brokerage agreement and any damages to be awarded in the event of a finding of agreement is breached. This applies to claims brought in Federal and State court.

High Profile/ Govt. cases:

Negligence has traditionally taken a secondary role to the more egregious examples of securities fraud. The SEC reports that recently it has ramped up efforts of enforcement efforts against negligence seeing a significant uptick in enforcement actions in the wake the number of high profile securities fraud scandals.